Target Canada


Target Canada Co. was the Canadian subsidiary of the Target Corporation, the eighth-largest discount retailer in the United States. Formerly headquartered in Mississauga, Ontario, the subsidiary was formed with the acquisition of Zellers store leases from the Hudson's Bay Company in January 2011. Target Canada opened its first store in March 2013, and was operating 133 locations by January 2015. Its main competition included Walmart Canada and the local Loblaws and Shoppers Drug Mart chains and Canadian Tire to some extent.
Target Canada was ultimately unsuccessful, with an overly-aggressive expansion initiative, in addition to higher prices and a limited selection of products compared to Target stores in the United States. The retail chain racked up losses of $2.1 billion in its lifespan, and was widely viewed as a failure, termed a "spectacular failure" by Amanda Lang of CBC News, "an unmitigated disaster" by Maclean's and "a gold standard case study in what retailers should not do when they enter a new market" by the Financial Post. Target Canada commenced Court-supervised restructuring proceedings in January 2015, and finally shut down all of their stores by April 12, 2015.

History

Trademark issues before 2010

In the absence of the Target Corporation chain in Canada, a number of retail companies, without any affiliation to the American company, made use of the "Target" name for various purposes. A regional variety store chain in Newfoundland and Labrador operated under the Target banner during the 1980s and early 1990s. There has also been a liquor store named Target Liquor in Edmonton, and a Target convenience store chain based in Toronto.
Before it entered Canada, Target Corporation attempted to solidify its rights to the "Target" brand name in Canada by buying the Canadian trademark rights of some of these existing users, in addition to filing new applications of its own.

Target Apparel trademark agreement

Target's expansion into Canada was threatened by one other party that claimed the Canadian rights to "Target" with respect to clothing. The Canadian trademark "Target Apparel" was registered in 1981 by Dylex Ltd., a Canadian retailer defunct since the early 2010s, covering "men's clothing, namely suits, pants, jackets, and coats". The rights to the mark were acquired in 2001 by Fairweather Ltd., part of the INC Group of Companies owned by Isaac Benitah. Target Apparel originally served as a private-label clothing brand, and not as the name of a retail store, and Fairweather would not apply to extend its trademark to cover retail services until April 2011.
INC Group opened a small Target Apparel retail store adjacent to the company's head office in December 2003. In late 2010, soon after Target's announcement that it planned to expand into Canada, INC began expanding the banner to other higher-profile locations, including conversions of some of its existing Labels stores. Target challenged INC's rights to the Target Apparel trade name on numerous occasions; INC had succeeded in retaining those rights, but faced a further court challenge with a trial set to start in 2012.
On February 1, 2012, it was announced that Fairweather Ltd. and Target reached an agreement concerning the use of the Target name in Canada. Under said agreement, Fairweather would cease use of the Target Apparel name by 2013, giving Target Canada complete ownership of the Target brand in Canada.

2010: Consideration of Canadian operations

Regular rumours surfaced since at least 2004 that Target was interested in expanding into Canada by acquiring Zellers outright. In January 2010, Target publicly indicated long-term plans to expand internationally, likely including Canada, but that those plans would not take effect until 2013 at the earliest.

2011–2013: Leaseholds acquisition and partnership

On January 13, 2011, Target announced that it would purchase the lease agreements of up to 220 Zellers stores for C$1.825 billion. Under the agreement, Zellers would sublease the properties, and continue to operate them as Zellers locations until at the earliest January 2012 and at latest the end of March 2013.
Target did not buy the Zellers chain, which was left with 64 stores in less desirable locations. HBC failed to find a buyer for the remaining stores and planned to continue operating Zellers as a smaller chain. However, the geographical constraints of serving these far-flung Zellers outlets meant that operating them was no longer economically viable, so HBC announced on July 26, 2012, that it would close almost all of these stores.
In May 2011, Target revealed its first 105 selections and stated that the vast majority of those in this first group would be converted to Target outlets. In September 2011, Target unveiled 84 additional selections, bringing the number of Zellers leases acquired to 189 below the prospective upper number of 220 announced in January. The first store opening cycle would be in March/April 2013, followed by four additional cycles later that year. Zellers locations to be converted were typically closed for six to nine months for significant remodelling and renovation. Target announced plans to hire 27,000 new employees to support its expansion into Canada, including 5,000 in Quebec, and that its food and grocery items in Canada would be supplied by Sobeys.
After the Zellers stores at the selected locations closed, Target planned to renovate between 125 and 135 of them, and reopen them under the Target banner. Target would sell the remaining 64 to 74 acquired locations to other retailers, including 39 already resold to Walmart Canada.
Unlike Walmart's entry to Canada with the acquisition of the Woolco stores in 1994, Zellers employees were not retained by Target nor Walmart, and they had to re-apply for their position to continue working in their same locations. Target Canada stated that former Zellers workers were guaranteed an interview though not a job; however, the United Food and Commercial Workers of Canada complained that many Zellers employees were not hired, including those with long years of service.
Target confirmed the list of its locations in July 2012. The chain finalized its 127 stores to open in 2013. Of this total, 125 were converted former Zellers stores. The other two locations in Niagara Falls and Centre Laval were sites that had been occupied by Walmart stores. The first Target stores in Canada were opened on March 5, 2013 in the Ontario communities of Guelph, Fergus, and Milton, being close to one of Target Canada's three distribution centres.

2013–2015: Years of operation

Target Canada had supply chain problems, but its parent company did not want the planned opening date to be delayed, since they did not want to continue paying rent on unopened stores.
On March 5, 2013, three Target stores in Milton, Fergus and Guelph, Ontario were opened to the public and operating as test stores, and a further 17 stores in Ontario opened on March 19, 2013. Four additional stores in Ontario were opened on March 28, 2013, followed by a number of openings in three western provinces on May 6, 2013. On July 16, 2013, Target opened more stores in four provinces, including in the cities of Regina and Saskatoon. Target opened more stores between September 17 and October 18, including in the provinces of Quebec and Nova Scotia. It opened 33 locations between November 13 and 22, including in the provinces of New Brunswick, Prince Edward Island and Newfoundland and Labrador. On March 14, 2014, Target opened three stores in the cities of Toronto, Edmonton and Victoria. On August 1, 2014, it opened three stores in the cities of Barrie, Mississauga and Candiac, Quebec.
Target Canada included smaller Starbucks stores in the majority of its locations. A notable Canadian clothing brand, Roots, was "temporarily" sold in Target Canada.

Early results

Target Canada president Tony Fisher expected that some Canadian consumers would continue to cross the border and shop at Target stores in the United States. Fisher acknowledged that the Canadian stores would not have price parity with their U.S. counterparts, saying "Transportation costs are higher, distribution costs are higher, fuel costs are higher, wage rates vary across the country, the tax rates are different, cost of goods are different, the duties — I think the scale we have here in Canada is quite different from the incredibly different, densely populated U.S. marketplace." Because of complexities and other legal requirements, Target's existing distribution network could not be used to service Target's Canadian locations. In addition, Canadian Target stores did not have local authority to order their own merchandise; this resulted in the Windsor, Ontario stores stocking Toronto Maple Leafs and Toronto Blue Jays apparel, instead of that of the Detroit Red Wings and Detroit Tigers, which were more popular in Windsor, given its proximity to Detroit. Supply chain and demand issues also led to situations where some of the early locations were not adequately stocked in certain product categories, resulting in empty shelves. The supply chain problems were blamed on using a brand new SAP inventory software and not giving sufficient time for staff to work out the system's problems, as the parent company refused to push back the planned launch date as they did not want to keep paying rent on unopened stores.
Target Corporation's expansion into Canada hoped to capitalize on Canadian shoppers who frequently crossed the border for its U.S. stores. However, this may have backfired as Canadian shoppers felt that Target Canada stores failed to meet the high expectations set by their U.S. counterparts. Target Canada enjoyed a strong opening, but subsequent results were disappointing, dragging down its parent company's second-quarter results. Despite the initial high traffic at Target's new stores, customers were not returning frequently enough to these stores to buy the basic household items, as that market was dominated by entrenched Canadian grocery and drug retail chains such as Loblaws, Shoppers Drug Mart, and Walmart Canada. In addition, while Target Canada aimed to have its customers do "one-stop shopping", Canadian consumers generally pick and choose between different retailers' strengths. While Target Canada stores were said to be an improvement over the untidy Zellers stores, some Canadians lamented that they missed the deals found at Zellers.
Paul Trussell, retailing analyst at Deutsche Bank, suggested that "traffic has slowed below expectations in recent weeks, driven partly by Canadians’ perception that prices are too high, both relative to Walmart Canada and Target's U.S. locations. While shoppers appreciate the higher quality assortment, especially in discretionary categories, the complaints on pricing were alarming." Target failed to anticipate that Canadian consumers would expect the retailer to match the lower prices in its U.S. stores, leading to some alienation and confusion, although Target CEO Gregg Steinhafel defended this practice saying "trying to compare prices at Target Canada with that of certain Target stores in the U.S. would be like comparing prices in Boston to prices in rural Iowa". Deutsche Bank's pricing survey on 31 health, beauty and food items at Canadian Target and Walmart stores found that while Target had a cheaper basket of goods by 19¢, Walmart had a pricing advantage of 65 percent of the popular items in the basket thanks to its own "Rollback" prices, likely furthering consumers’ current price perceptions. Other American chains operating in Canada did not suffer a backlash from Canada–U.S. pricing disparities as much, likely as Target had hyped its Canadian stores to provide the same experience as their U.S. counterparts.
Target projected for its Canadian operations to bring in ten percent of its profits by 2017. However, experts suggested that it wanted too much and too quickly from Canadians, while underestimating the domestic competition. The disappointing results from Canadian stores were said to be a major reason, along with the January 2014 major security breach, for the resignation of parent company CEO Gregg Steinhafel, though Target reiterated its commitment to the Canadian market. Two weeks after Steinhafel's abrupt departure, Target Canada president Anthony S. "Tony" Fisher was dismissed and replaced by Mark Schindele, who had been serving as Target's senior vice-president of merchandising operations. Subsequent commentators did not blame Fisher, "the odds were stacked against him from the start, given the extremely tight timeline and the thin margin for error."
Around the time that Mark Schindele took over, Target Canada had largely sorted out its inventory issues. However, Brian Cornell, who replaced Steinhafel as CEO of the parent company, was a company outsider who had reportedly pushed for Target Canada to be shut down if its financial performance did not improve.

2015: Closure

On January 15, 2015, Target Canada announced that it had commenced Court-supervised restructuring proceedings under the Companies' Creditors Arrangement Act and that it would close all 133 of its Canadian stores. Two planned new store openings, one at the Harbour Plaza condo project in the South Core of downtown Toronto, and the Bayshore Shopping Centre in the west end of Ottawa, were cancelled due to the closure. Likewise, plans to open a smaller Target store in the former Zellers location in Lawrence Square Shopping Centre in Toronto similar to the CityTarget format were also cancelled and were replaced with an additional public mall entrance, Marshalls, HomeSense and PetSmart by early 2016.
The subsidiary was projected to only make a profit by 2021; by 2015, Target had lost $2.1 billion. Target Canada would have been unable to meet its employees' payroll for the week of January 16, 2015 if it had not filed for Court protection from creditors.
in February 2015
Liquidation sales began at the stores the following day; Target began to close stores on March 18, 2015, with 58 locations scheduled to close that week, and 58 in total closed by April 5, 2015. The remaining 58 stores closed on April 12, 2015.
In May 2015, the company returned some of its leases back to their landlords, and began the process of auctioning off leases and properties to other new owners. Canadian Tire announced plans to acquire 12 locations, Walmart Canada reached a deal to acquire 13 locations and one of its distribution centres, and Lowe's also reached a deal to acquire 13 locations and a distribution centre. Giant Tiger also acquired a part of a Target location. Metro's discount supermarket chain Super C would open stores in two former Target stores in Quebec.

Target International Shopping

In October 2015, Target began offering international shipping on goods sold on their online site, which includes Canada. Prices for Canadian shoppers are converted to Canadian dollars, excluding duties and taxes. As of February 2020, Target has discontinued shipping to Canada and other international locations.

Timeline

2011

2016

REDcard

The REDcard was offered in Canada as either a debit card or a credit card. Around 30,000 Canadians signed up for the REDcard prior to Target's opening in 2013. Like its American counterpart, the cards offered a 5% discount on almost all Target purchases and the debit card allowed up to a $60 cash withdrawal. The Canadian version did not offer free online shipping, a 30-day extended return period, a 1% donation to K–12 schools on almost all purchases, a Visa credit card or a store-only credit card that are available in the United States. Target Canada stores did not accept U.S.-issued REDcards in its stores. Target Canada continued to honour the REDcard throughout its liquidation sales.

Target Canada: The Play

Robert Motum, a Toronto-based playwright, spent two years interviewing and gathering the stories of former Target Canada employees. The words of 60 employees have been compiled into A Community Target – a verbatim play that examines the human story of Canada's precarious retail climate and depicts Target's whirlwind venture north of the border. The piece, commissioned by Outside the March Theatre Company, is to be staged inside an empty Target store.